One of the most volatile industries in the market these days is mortgage insurance. Of course, its really no surprise. The vast majority of businesses involved in the housing and mortgage industries are dealing with an uncertain future.
And the mortgage insurance industry has been even crazier than most. In fact, there are only a few companies still standing.
To be precise, there are basically three companies left specializing in mortgage insurance. Those three are PMI Group (PMI), MGIC Investment Corp (MTG), and Radian Group (RDN).
Ive discussed the problems with PMI before and how poorly the stock has been doing. However, all three companies have taken it on the chin this year.
This time around, MTG is the penny stock on the move. But theres something a little different going on this week the shares are actually moving higher.
Ill get back to that in a minute. First, lets take a closer look at the company.
MTG is the largest of the remaining mortgage insurers. The companys size provides some insulation from disaster but it also means they have to pay out more claims than anyone else. And we all know mortgage claims are through the roof.
Investors havent failed to notice the companys imposing challenges. Year to date, the stock is down a whopping 71%.
But heres the thing
The shares have reversed course. And as of this writing, MTG is up over 72%… this week!
In a nutshell insider buying.
You see, MTGs CFO just purchased 20,000 shares on the open market. Thats his second 20,000-lot purchase this month. And the day before, the COO purchased his own block of 20,000 shares.
All told, insiders gobbled up 210,000 shares in August. Clearly, the people who run MTG arent worried about the companys future. In fact, they clearly believe in MTGs upside potential.
So is MTG a screaming buy right now?
In a word maybe.
On one hand, insiders love the stock. On the other hand, its their job to show investors they have faith in their own company. And there are still significant headwinds in the mortgage insurance industry.
Still, theres a potentially positive catalyst on the horizon. PMI might be on its way out. And if PMI goes bankrupt, MTG and RDN could capitalize on the additional business.
Bottom line investing in MTG (and mortgage insurers in general) is a risky proposition. But insider buying is usually a strong signal a company isnt ready to throw in the towel. And if this weeks huge move higher is any indication, insiders arent the only investors who believe in MTGs upside potential.
Yours in profit,
Category: Penny Stocks On The Move